Gary Johnson on Tax Reform

Libertarian presidential nominee; former Republican NM Governor

Revenue-neutral FairTax: life without the IRS

Q: You support the FairTax [a flat-rate consumption tax]?

JOHNSON: I suggest that everybody look at the FairTax as a way to dot the i's and cross the t's on how you would accomplish one federal consumption tax. Whether it's the exact percentages or
exactly the way that the FairTax proposal does that, but it is laid out very specifically.

Q: But you wind up cutting the amount of revenues that government has to work with...

JOHNSON: No, actually, it's revenue neutral.

Q: How will government provide services if you're cutting your revenues in half?

JOHNSON: No, no, no. think we're getting too in the weeds here. The bottom line is that we're going to look to make this revenue neutral. And if it needs to be tweaked,
look, this is an open debate and discussion that we as Americans need to have. Look, imagine life in this country without the IRS. Greatly simplified. The more money you make, the more things you consume.

Current tax code penalizes productivity & investment

Today's federal tax code does all the wrong things. It penalizes productivity, savings and investment, while rewarding inefficiency and designating winners and losers according to political whim.
For far too long, tax laws have been used not just as a means to collect needed revenues, but as a weapon with which to manipulate our behavior, create and destroy industries and fulfill politicians' dreams of social engineering.
The result is a tax code that is more than 70,000 pages long enforced by a government agency with almost 100,000 employees.
It is a nothing less than a massive deployment of government force on our lives, our finances and our freedom.

Replace inheritance tax with FairTax

Many have heard about the fair tax, but fewer know much about it. "Simply put, the FairTax is a consumption tax, rather than a tax on income," former New Mexico Governor Gary Johnson explains. "The basic idea, embraced by many economists, is to eliminate
virtually all federal taxes, from income taxes to payroll taxes, and replace them with a single tax on purchases. In the most widely accepted version of this consumption tax, the rate paid on purchases would be 23%, which roughly equates to the lowest
current income tax rate of 15% plus payroll taxes. Key to the concept is a 'prebate' that would provide every household with an advance tax refund each month that would have the effect of exempting purchases of necessities from the tax.
It is best described as a total tax replacement plan because it replaces the individual and corporate income, payroll, and estate and gift taxes, with a 23 percent national retail sales tax on the consumption of new goods and service without exception."

23% national sales tax while eliminating the IRS

Former New Mexico Gov. Gary Johnson, who ditched his Republican bid for president in December, captured the Libertarian Party's nomination on Saturday in Las Vegas, adding a third party candidate with some name recognition to the
2012 race.

Mr. Johnson is likely to be a sideshow in the presidential contest. He will be less well-funded than President Barack Obama and Republican
Mitt Romney, while holding policy positions often considered outside mainstream political thought. Among other things, he has called for the elimination of the Education Department, cutting 43% of federal spending and instituting a
23% national sales tax while eliminating the Internal Revenue Service. He also backs gay marriage and supports the legalization of marijuana.

Get rid of income tax and capital-gains tax

We need to get rid of the income tax. Giant, slow corporations spend their money on lobbying because tax avoidance is where their profit is. General Electric earned $14.2 billion in 2010 and paid zero taxes on it. Why?
Because it has the lobbyists to get subsidies and tax breaks.

But those mom-and-pop stores? The tech startups? The nimble new corporations with new ideas and new visions for our economy? They pay as much as 35 cents on every dollar they earn.
When the company pays its employees, the government taxes that money again. We need to stop taxing work, savings and investment. I advocate removing all income taxes, all capital-gains taxes,
and replacing them with a consumption tax, kind of a national sales tax called the Fair-tax.

FairTax on all new goods & services, with prebates for poor

How does Fair-tax fund the government? When anyone purchases a new good or service for personal consumption, be it a DVD or a yacht, the person is taxed. Fair-tax doesn't tax used goods or business-to-business purchases.

Some think the
Fair-tax is regressive, but in fact it's progressive--taxing the wealthy more than the poor. Fair-tax issues a "prebate" for families to spend on food, clothing, transportation, medical care or whatever they want to spend it on--it's their money.
Undocumented immigrants will pay their taxes if they want to buy anything. They need a Social Security card to receive a prebate, so the incentive is for immigrants to get themselves on the books as fast as possible.

The Fair-tax replaces employment taxes, payroll taxes, all income taxes, and all capital-gains taxes.

FairTax would absolutely reboot the American economy

CAIN: [to Johnson] : My 9-9-9 plan starts with throwing out the current tax code and pass 9% business flat tax, 9% personal income tax, and the 9% national sales tax.

JOHNSON: Throwing out the entire federal tax system and replacing it
with a consumption tax, the FairTax, which would absolutely reboot the American economy because it does away with the corporate tax to create tens of millions of jobs in this country.

Source: 2011 GOP Google debate in Orlando FL
, Sep 22, 2011

Replace tax system with a FairTax

Q: With regards to jobs, how are you going to turn this country around?

A: My next-door neighbor's dogs have created more shovel-ready jobs than this current administration. Balance the federal budget now, not 15 years from now, not 20 years from now,
but now. And throw out the entire federal tax system, replace it with a FairTax, a consumption tax, that by all measurements is just that. It's fair. It does away with corporate income tax. [That would] create tens of millions of jobs in this country.

Source: 2011 GOP Google debate in Orlando FL
, Sep 22, 2011

Replace job-killing tax code with FairTax

Instead of nibbling around the edges of a job-killing tax code, we need to throw it out. Eliminate income, business and payroll taxes altogether, and replace them with a FAIR tax (FairTax.org) that will result in millions of jobs.
Instead of spending more, balance the budget now. Get the burden of government spending and borrowing off the economy, and it will flourish.
And as the government's chief executive, the President needs to get federal agencies out of the business of managing the economy, and into the business of establishing regulatory certainty.
Do those things, and the U.S. will become the job magnet of the world.

Reduce state personal income tax from 8.5% to 8%

In his first term, Gov. Johnson proposed reducing the top rate of the state personal income tax from 8.5% to 8%, along with other tax cuts, but was rebuffed by the Legislature. He signed a repeal of a 1993 6-cent-a-gallon tax hike. In 1997, Gov.
Johnson again proposed to cut the top rate, this time to 8.3%. The legislature proposed to cut it to 8.2%, but offset some of the revenue losses with a cigarette tax increase. Johnson signed the income tax cut, and vetoed the cigarette tax hike.

No national sales tax or VAT.

Johnson adopted the National Governors Association policy:

State tax policy is closely linked to federal policy. 36 states currently use either federal income or federal tax liability as the state tax base for personal income taxes. It is critical that Congress and the administration do not enact tax reform in a vacuum, but in consultation and in partnership with the nationís Governors.

National Sales or Value-Added Tax The nationís Governors oppose a national sales or transactional value-added tax. Such taxes would intrude into a tax area that has traditionally been reserved for and relied on by state and local governments. If enacted, either of these taxes would seriously threaten the ability of state and local governments to maintain their tax base.

Current Income Tax If Congress decides to reform the current tax system, they should reduce the complexity of current income taxes; increase incentives to work, save, and invest; and increase efficiency and fairness. As part of any reform of the
current income tax, the nationís Governors would oppose any modification to the deductibility of state income taxes, property taxes, and the interest on state and local bonds.

Transition If major tax reform is enacted, it should not be implemented for at least three years, to give states ample time to adjust their own tax systems.

Information Needs of the StatesThe ability of states to tax various revenue sources depends to a large extent on information that only the federal government can collect. This is becoming much more important given the complexity of both the international and domestic economies in tracing where goods and income are generated. It is critical that the federal government separate tax reform per se from the information that is collected from individuals, businesses, and corporations with respect to income generated. The data collection role of the federal government must be developed in partnership with state and local governments.